[SystemSafety] How far does insurance economic incentive push safety?

[Eric Marsden]

Concerning these statistics on safety of maritime operations, I think 
care is needed in interpreting a link with the role of insurance. The 
NIOSH data concerns the "U.S. water transportation industry", so I 
assume (I'm certainly not an expert on maritime safety) is concerned by 
at least some safety regulation.

If you consider international maritime operations, where safety 
regulations are weak, some large operators at least have quite 
reasonable occupational safety records. For example Maersk suffered 3 
employee fatalities (5 including contractors) in 2019 and 1 in 2020, for 
84000 employees, a rate of 3.6 and 1.2 per 100000 workers. MSC suffered 
1 fatal accident in 2019 for 70000 employees, a rate of 1.4. LTIF rates 
for the two companies are around 1.2, similar to construction work in 
many countries, which is generally heavily regulated.

Sources:
https://www.maersk.com/about/sustainability/reports
https://www.msc.com/bwa/sustainability

I'm not sure that it is easy to find data that can help establish this 
link between presence/level of insurance coverage and safety (large 
insurers and reinsurers presumably have some data available, but it's 
sensitive). It would be possible, and I think interesting, to compare 
the type of interactions that take place between regulators and 
regulated entities, and the interactions between insurers and insured 
companies. In particular because safety regulators in various sectors 
are increasingly adopting "soft law" approaches as a complement to 
traditional compliance-based enforcement.

Eric



On 13/04/2021 02:17, Phil Koopman wrote:
> I appreciate the various replies -- thanks!
>
> I'm still sorting through my particular angle on this topic, and 
> further comments are welcome, but I wanted to pause to express my 
> appreciation at response so far.
>
> It seems that at least in some cases a confounding issue is whether an 
> elevated risk is associated with increased profits. For example, if 
> insurance premiums are small compared to profit, then you could 
> increase profit more easily simply by scaling up operations even at 
> elevated risk rather than spending time reducing a small piece of your 
> expense pie.  This would argue against insurance premium economic 
> pressure necessarily leading to lower risk in the absence of regulation.
>
> A potential case in point here might be commercial maritime 
> operations.  I understand the primary pressure to keep risk in check 
> here is insurance rather than regulation.  But that has resulted in a 
> significant fatality rate.
>
> For example:
> https://www.cdc.gov/niosh/programs/cmshs/marine_transportation.html
> "From 2011–2017, there were 87 fatal injuries (18.4 per 100,000 
> workers) among marine transportation workers, nearly *_six times the 
> rate of all U.S. workers_*."
>
> This one shows some improvement over time, but still a high ratio 
> compared to other occupations:
> https://academic.oup.com/occmed/article/64/4/259/1464740
> "During 2003–12, the fatal accident rate in shipping (14.5 per 100 
> 000) was *_21 times that in the general British workforce, 4.7 times 
> that in the construction industry and 13 times that in 
> manufacturing_*. Of 20 merchant fleets worldwide with population-based 
> fatal accident rates, most have shown large reductions over time."
>
> More to understand, but an interesting topic, at least to me so far.
>
> -- Phil
>

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